LUkCLAN SCVLkLIGN DL81 CkISIS LUkCLAN SCVLkLIGN DL81 CkISIS

Introduct|on Introduct|on
W W Lurozone Lurozone
W W Luros Luros
W W Sovere|gn debt cr|s|s Sovere|gn debt cr|s|s
W W Ice|and Cr|s|s Ice|and Cr|s|s
W W Cr|s|s of conf|dence Cr|s|s of conf|dence
W W Government def|c|ts and debt |eve|s Government def|c|ts and debt |eve|s
W W Luropean f|nanc|a| stab|||ty fac|||ty Luropean f|nanc|a| stab|||ty fac|||ty
W W ko|e of Internat|ona| Monetary Iund ko|e of Internat|ona| Monetary Iund
W W Latest on Luropean debt cr|s|s Latest on Luropean debt cr|s|s
Sources of prob|ems Sources of prob|ems
WGreeceLack of enforcement of ru|es
WSpa|nCo||apse of government
WA||owed excess|ve |eve|s of debt to accuma|ate
WImproper use of funds g|ven by IMI
GkLLCL GkLLCL
1 1 Creek economy 1ralLs Creek economy 1ralLs
2 2 8easons for Lhelr deflclLs 8easons for Lhelr deflclLs
W W arge lnvesLmenLs ln Lhe publlc secLor arge lnvesLmenLs ln Lhe publlc secLor
W W [obs penslon and oLher soclal beneflL [obs penslon and oLher soclal beneflL
W W uevaluaLlon of currency uevaluaLlon of currency
W W Ma[or lndusLrles affecLed Ma[or lndusLrles affecLed
W W LsLlmaLed Lax evaslon cosL Lhe Creek governmenL over LsLlmaLed Lax evaslon cosL Lhe Creek governmenL over
$20mllllon $20mllllon
GkLLCL GkLLCL
W Creece mlsreporLed Lhe counLrles offlclal
economlc sLaLlsLlcs
W Pldlng Lhe acLual level of lLs borrowlng purpose of Lhls deal
was Lo hlde Lhe acLual deflclL from Lu
W 8evlsed Lhe deflclL from 6 Lo 127
Creek uebL
Creek debL ln comparlson Lo Lurozone average
Danger of defau|t
W JlLhouL a ballouL agreemenL Lhere was a posslblllLy LhaL
Creece would prefer Lo defaulL on some of lLs debL
W AnalysLs gave a wlde range of defaulL probablllLles esLlmaLlng
a 23 Lo 90 chance of a defaulL or resLrucLurlng
W Some experLs have noneLheless argued LhaL Lhe besL opLlon aL
Lhls sLage for Creece ls Lo englneer an orderly defaulL"
Auster|ty and |oan agreement
ln 2010
W lnlLlally Lhe Creek parllamenL passed Lhe Lconomy
roLecLlon 8lll expecLed Lo save t48 bllllon
W aLer Lhe Creek governmenL requesLed LhaL Lhe
Lu/lnLernaLlonal MoneLary fund(lMl) ballouL package
be acLlvaLed
W Creece needed money or lL would face a debL roll
over of $113bn
kesponse
W A loan agreemenL was reached beLween
Creece Lhe oLher euro zone counLrles and lMl
W 1he deal conslsLed of an lmmedlaLe t43 bllllon ln loans Lo be
provlded ln 2010
W A LoLal of t110 bllllon has been agreed
W 8Cl was 3 for Lhe Luro zone
Auster|ty measures Auster|ty measures
W ubllc secLor llmlL of t1000 lnLroduced Lo blannual bonus
abollshed enLlrely for Lhose earnlng over t3000 a monLh
W An 8 cuL on publlc secLor allowances
W LxLraordlnary Laxes lmposed on company proflLs
W lncreases ln vA1
W 10 rlse ln luxury Laxes and Laxes on alcohol clgareLLes and
fuel
W LquallzaLlon of mens and womens penslon age llmlLs
W Average reLlremenL age for publlc secLor workers has
lncreased from 61 Lo 63
W ubllcowned companles Lo be reduced from 6000 Lo 2000
Ire|and cr|s|s Ire|and cr|s|s
auses
W osL compeLlLlveness
W roperLy bubble
W Clobal lmbalances
LffecLs
W 8anklng crlsls
W llscal crlsls
W Lconomlc crlsls
W Soclal crlsls
reasons Why Luropes debt cr|s|s
|snt over
W Creece's ball ouL pollcy noL convlnclng enough
W 1he laLesL agreemenL has done noLhlng Lo bulld confldence ln
Lhe oLher weak economles of Lhe euro zone
W 1he second Creek ballouL may make fuLure ballouLs even more
llkely
W Luro zone sLlll doesnL have Lhe flrepower Lo flghL such
conLaglon
W 1he Luro zone sLlll has no comprehenslve soluLlon or approach
Lo solvlng lLs debL crlsls
W Lhe euro zone ls sLlll noL addresslng lLs deeper problems
oss|b|e So|ut|ons oss|b|e So|ut|ons
1here are Lwo problems Lo address
W Pow Lo prevenL debL problems from happenlng
W JhaL Lo do lf problems develop desplLe aLLempLs Lo prevenL Lhem
W 8all ouL or lnsurance fund wlLh Lhe conLrlbuLlons for lndlvldual counLrles
W A key facLor here ls Lhe ablllLy Lo measure debL loads accuraLely
W 1hus ln addlLlon Lo Lhe need for penalLles when counLrles are ouL of
compllance
What shou|d be done |f prob|ems deve|op desp|te attempts to prevent
them?
W 1o do noLhlng [usL walL
W 1he oLher opLlons are
W CLher counLrles could granL Lhe counLrles havlng Lroubles shorLLerm
loans and credlLs
W Lhere could be a dlrecL ballouL from oLher counLrles le Lhe oLher
counLrles pay off debLs wlLhouL asklng for repaymenL ln Lhe fuLure
W allow counLrles Lo Lemporarlly drop Lhe euro and adopL Lhelr own
currency (ln some condlLlons) devalue and Lhen reLurn Lo Lhe euro
W An lnsurance fund of some sorL LhaL can be used Lo wlnd down
counLrles ln Lrouble
W Luropean MoneLary lund